Euro-zone factory-output gains ease worries about growth

A fourth straight monthly rise in industrial output in the euro-zone, led by its three largest economies, provided further information that the region’s severe recession ended around the middle of the year.

Industrial output in the 16 countries that have adopted the euro currency swelled 0.9% in August from July, the European Union’s statistics agency said Wednesday. Though below economist expectations, significant upward revisions to June and July output signal that the factory sector has performed better than economists had expected.

The production data also eased worries that the euro zone might slide back into contraction later this year or next, though some economists warned that growth would likely slow once government stimulus programs run their course.

Output growth was concentrated in the euro zone’s biggest economies, with Germany up 1.5% from July, France growing 1.9% and Italy’s factory output swelling 7%.

Klaus Baader, chief European economist at Societe Generale, estimates that eurozone gross domestic product grew 0,5% last quarter, on a quarterly basis. GDP shrank 0.2% in the second quarter and declined a record 2.5% in the first quarter.

Societe Generale’s forecast for the third quarter, though at the high end of the range of economic expectations, is by no means robust when compared with expected growth rates in emerging markets and other major economies such as the U.S.

The steady recovery in production suggests there is probably enough momentum in both investment and consumer spending to keep GDP from sliding back into negative territory.

The Wall Street Journal October 2009

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China's Surprising Trade Numbers

Amongst the flood of economic statistics released this week by Beijing, the trade numbers certainly were some of the most notable. With imports up 19.4% and exports up just 2.4%, the least since 2009, China registered a $7.3 billion trade deficit, its first since last March (by contrast, the Bloomberg survey of economists had been predicting a surplus of $4.9 billion). So does this mean the world should expect China to start running a trade deficit regularly, a possibility that would likely lessen trade frictions, and might even ease global pressure on China to more quickly appreciate its currency, the yuan?

Not so fast. As numerous analysts pointed out the unusual trade numbers have much to do with the seasonal effect of the Chinese New Year, which fell in early February this year. That holiday tends to have a much larger impact on exports than on imports, as factory owners and workers tend to take off not just the official holiday, but often the days surrounding Chinese New Year, too. “We believe the trade deficit is likely to be a temporary phenomenon distorted by the Lunar new Year,” write Yu Song in a Goldman Sachs Asia Economics Data Flash. UBS for its part is predicting China will still run a $150 billion trade surplus for the whole year—“smaller than in 2010 but still sizable,” writes economist Tao Wang.

Still, the latest trade numbers—and the likely smaller surplus this year—will provide ready ammunition for Beijing as it faces further criticism on the value of the yuan. Chinese officials already have been defending the country’s currency policy during the ongoing legislative session that closes Monday. China will no doubt attempt to point to this number to deflect the criticism from the U.S. and other trading partners that the yuan is devalued.

Business Week March 2011

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